As of January 2, 2026, we had stock options and other share-based compensation outstanding under our 2024 Equity Incentive Plan and predecessor plans (collectively, the “L3Harris SIPs”). As part of our long-term incentive compensation program, we have made awards to employees in the form of RSUs, PSUs and non-qualified stock options under the L3Harris SIPs. We have also awarded RSUs in the form of deferred units to our non-employee directors. We believe that share-based awards more closely align the interests of participants with those of shareholders.

Share-based compensation expense was $113 million, $97 million and $89 million for fiscal 2025, 2024 and 2023, respectively. The related tax benefit for share-based compensation expense was $28 million, $20 million, and $19 million for fiscal 2025, 2024, and 2023, respectively.

As of January 2, 2026, a total of 19.6 million shares of common stock remained available under our L3Harris SIPs for future issuance (excluding shares to be issued in respect of outstanding stock options, with each full-value award (e.g., RSUs and PSUs) counting as 3.8 shares against the total remaining for future issuance). During fiscal 2025, we issued an aggregate of 1.1 million shares of common stock under the terms of our L3Harris SIPs, which is net of shares withheld for tax purposes.

RSUs. RSUs granted under our L3Harris SIPs are not transferable until vested and the restrictions generally lapse upon the achievement of continued employment (or board membership) over a specified time period.

The grant-date fair value of these awards was based on the closing price of our common stock on the grant date and is amortized to compensation expense over the vesting period.


	Units (In thousands)	Weighted-Average Grant-Date Price Per Unit

RSUs outstanding as of January 3, 2025	582	$	210.28
Granted	249	$	218.06
Vested	(208)	$	221.37
Forfeited	(46)	$	210.14
RSUs outstanding as of January 2, 2026	577	$	211.19

As of January 2, 2026, there was $57 million of total unrecognized compensation expense related to these awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 2.19 years. The weighted-average grant-date price per unit was $218.06, $211.95 and $199.33 for awards granted in fiscal 2025, 2024 and 2023, respectively. The total fair value of the awards that vested was $46 million, $46 million and $44 million in fiscal 2025, 2024 and 2023, respectively.

PSUs. As of January 2, 2026, all outstanding PSUs granted under our L3Harris SIPs are subject to performance criteria, such as meeting predetermined operating income or earnings per share, return on invested capital targets and market conditions, such as total shareholder return, for a three-year performance period. These awards also generally vest after a three-year performance period. The final determination of the number of shares to be issued in respect of an award is made by our Board or a committee thereof.

The grant-date fair value of awards with market conditions was determined based on a multifactor Monte Carlo valuation model that simulates our stock price and TSR relative to other companies in the S&P 500, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair value of these awards is amortized to compensation expense over the performance period if achievement of the performance measures is considered probable.


	Units (In thousands)	Weighted-Average Grant-Date Price Per Unit

PSUs outstanding as of January 3, 2025	426	$	236.42
Granted	185	$	217.67
Adjustment for achievement of performance measures	9	$	258.83
Vested	(137)	$	258.83
Forfeited	(32)	$	223.83
PSUs outstanding as of January 2, 2026	451	$	223.20

As of January 2, 2026, there was $37 million of total unrecognized compensation expense related to these awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.71 years. The weighted-average grant-date price per unit was $217.67, $230.09 and $223.09 for awards granted in fiscal 2025, 2024 and 2023, respectively. The total fair value of the awards that vested was $36 million, $37 million and $42 million in fiscal 2025, 2024 and 2023, respectively.

Stock Options. Exercise prices for stock options, including performance stock options, that have been granted under the L3Harris SIPs are equal to or greater than the fair market value of our common stock on the grant date, using the closing stock price of our common stock. Stock options may be exercised for a period of ten years after the date of grant, and stock options, other than performance stock options, generally become exercisable in installments, which are typically 33.3% one year from the grant date, 33.3% two years from the grant date and 33.3% three years from the grant date. In certain instances, vesting and exercisability are also subject to performance criteria.

The grant-date fair value of each stock option award was determined using the Black-Scholes-Merton option-pricing model which used assumptions noted in the following table:


	Fiscal Year
	2025	2024	2023

Expected dividends	2.29%	2.18%	2.17%
Expected volatility	26.52%	25.29%	28.60%
Risk-free interest rates	4.03%	3.80% - 4.64%	3.48% - 4.27%
Expected term (years)	5.00	5.06	5.04

Expected volatility over the expected term of the stock options is based on implied volatility from traded stock options on our common stock and the historical volatility of our stock price. The expected term of the stock options is based on historical observations of our common stock, considering average years to exercise for all stock options exercised and average years to cancellation for all stock options canceled, as well as average years remaining for vested outstanding stock options, which is calculated based on the weighted-average of these three inputs. The risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.


	Shares (In thousands)	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In millions)

Stock options outstanding as of January 3, 2025	2,537	$	191.09
Granted	388	$	206.11
Exercised	(862)	$	169.12
Forfeited or canceled	(82)	$	211.45
Stock options outstanding as of January 2, 2026	1,981	$	202.70	6.16	$	202
Stock options exercisable as of January 2, 2026	1,289	$	199.18	4.87	$	136

The weighted-average grant-date fair value per share was $49.20, $50.99 and $54.63 for stock options granted in fiscal 2025, 2024 and 2023, respectively. The total intrinsic value of stock options at the time of exercise was $82 million, $100 million and $23 million for stock options exercised in fiscal 2025, 2024 and 2023, respectively.


	Shares (In thousands)	Weighted-Average Grant-Date Fair Value Per Share

Unvested stock options as of January 3, 2025	635	$	52.54
Granted	388	$	49.20
Vested	(253)	$	52.86
Forfeited	(79)	$	51.58
Unvested stock options as of January 2, 2026	691	$	50.43

As of January 2, 2026, there was $20 million of total unrecognized compensation expense related to unvested stock options granted under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.80 years. The total fair value of stock options that vested was $13 million, $14 million and $14 million in fiscal 2025, 2024 and 2023, respectively.